Audit Report 12-20R: Addressing Performance Problems of High-Risk Lenders Remains a Challenge for the Small Business Administration

This report presents the results of the audit of actions taken by the Small Business Administration to mitigate material lender risks identified in on-site reviews before and after passage of the American Recovery and Reinvestment Act of 2009.  The audit objective was to determine whether the SBA took actions to mitigate material lender risks identified in on-site reviews before and after passage of the Recovery Act.  To answer the objective, the OIG examined the most recent on-site review reports completed between September 2005 and October 2010 for 16 lenders selected from a universe of 57 lenders, with 33 reports.  The OIG found that the SBA did not always take actions to address lender risks and limit its exposure to losses from a combined portfolio worth more than $4.5 billion.  The OIG issued two findings, specifically:  (1) the SBA did not recognize and take action to address significant lender weaknesses and, (2) the SBA needs to improve its on-site and purchase review process.  The OIG made six recommendations.